All the hyperbole, demagoguery, and scare tactics surrounding the recent “sequestration” debate should not deter the citizenry from identifying the real problem underlying our federal budgetary and fiscal situation.
Federal budget policy was significantly affected by the Congressional Budget Act of 1974, passed by a heavily Democratic Congress and signed by an embattled President Richard Nixon, embroiled in the Watergate scandal. This law specified the manner in which budgeting was to be done moving forward and enshrined its central feature – “baseline budgeting.”
Briefly, baseline budgeting takes the spending from a current fiscal year and establishes it as the starting point (the baseline) for calculating the ensuing year’s budget. This virtually guarantees that federal spending will increase every year, regardless of actual need or economic circumstance. In effect, it puts federal spending on “automatic pilot,” both in the entitlement and discretionary spending domains.
This process is similar to that of “compound interest” in personal finance. As percentage increases are added to existing baseline budgets each year, the effect becomes cumulative and progressive over time. Little wonder that the federal deficit and resulting debt have soared.
We must also understand that, in Washington, if a program is scheduled for a 7 percent spending increase next year and then that percentage of increase is reduced (as in the current sequester situation) to, say, a 4 percent net increase, this is portrayed as a 3 percent cut. Only in Washington could such a definition of a “cut” pass the laugh test!
One might wonder why this process has not been abolished after 39 consecutive years of increased annual spending and the huge, unsustainable national debt it has produced. The plain truth is that over the decades the Democratic Party has resisted every attempt at even partially modifying this approach. This is again in evidence as Democrat President Barack Obama and his Democrat allies in Congress are categorizing even slightly lowered increases in federal spending as “catastrophic” and are predicting apocalyptic scenarios due to the sequester.
It’s long past time for Americans to realize what has produced our current financial mess and to demand that our elected officials find common sense remedies for it. A good first step would be to push our representatives to amend the budget process by eliminating baseline budgeting and force every governmental agency to fully justify its spending in light of common sense and fiscal prudence. It should be clear to everyone where the current madness will inevitably lead.